GMR Airports Limited — Q1 FY25 earnings call

Call held 14 Aug 2024

Management summary

GMR Airports reported a strong Q1 FY25 with 19% YoY income growth and 18% YoY EBITDA growth, driven by robust passenger traffic across its airports. The merger completion marks a significant corporate milestone. Despite a loss from continuing operations due to expansion-related costs and an increase in net debt, the company anticipates debt to peak within 12-18 months and expects future revenue growth from new tariffs and expanded capacities.

Highlights

  • Total income grew 19% YoY to INR 25.2 billion, driven by strong traffic growth.

  • EBITDA increased 18% YoY to INR 10.2 billion, with EBITDA margin improving to 52% from 48% in Q4 FY24.

  • Total passenger traffic rose 7% YoY to 31.8 million, with Delhi (7% YoY), Hyderabad (10% YoY), and Goa (19% YoY) all showing robust growth.

  • Delhi and Hyderabad Airport expansions are 100% physically complete, with Delhi's new Terminal 1 operations starting shortly.

  • Goa Airport reported a 121% YoY increase in total income to INR 946 million and a positive EBITDA of INR 397 million in its initial years.

Concerns

  • Reported a loss from continuing operations of INR 3.4 billion due to higher finance costs and depreciation from airport expansions.

  • Consolidated net debt, excluding FCCBs, increased by $9 billion (approx. INR 750 crores) versus Q4 FY24 to INR 280 billion, driven by new borrowings for Bhogapuram and Delhi capex.

Key financials

  1. Total Income ₹2,520 Cr +19%YoY
  2. EBITDA ₹1,020 Cr +18%YoY
  3. EBITDA Margin 52% +4%QoQ
  4. Loss from Continuing Operations ₹-340 Cr
  5. Consolidated Net Debt (ex-FCCBs) ₹28,000 Cr
  6. Total Passenger Traffic 31.8 Mn +7%YoY

What they filed

Q1 FY27: revenue up 156.7%, net profit up 132.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue282 271 508 478 945 +235%1,239 +357%1,581 +211%1,227 +157%
EBITDA114 121 358 109 239 +110%343 +183%675 +89%386 +254%
Net profit-63 -49 68 -178 -133 −111%50 +202%403 +493%58 +133%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Total Income
₹1,964.6 Cr Total
  • Delhi Airport ₹1,290 Cr 65.7%
  • Hyderabad Airport ₹580 Cr 29.5%
  • Mopa (Goa) Airport ₹94.6 Cr 4.8%

Capital allocation

high confidence
  • Capex ₹1,200 Cr
    • Bhogapuram Airport development ₹1,200 Cr
    • Balance capital expenditures at Delhi Airport
    Consolidated net debt, excluding the FCCBs of $25.3 billion stood at INR 280 billion, increasing by about $9 billion versus in Q4FY24. This was mainly driven by a combination of borrowings raised at Bhogapuram Airport and payment of balance capital expenditures at Delhi, partly offset by repayment of foreign currency notes at Hyderabad. ... Bhogapuram Airport, now the construction is happening in full swing. And as Saurabh has explained, we have almost touched the 34% of the progress. In this current financial year, we are likely to spend about INR 12 billion to INR 13 billion on the capex.
  • Debt Net ₹28,000 Cr
    • New borrowing Borrowings raised at Bhogapuram Airport
    • Repayment Repayment of foreign currency notes at Hyderabad
    Consolidated net debt, excluding the FCCBs of $25.3 billion stood at INR 280 billion, increasing by about $9 billion versus in Q4FY24. This was mainly driven by a combination of borrowings raised at Bhogapuram Airport and payment of balance capital expenditures at Delhi, partly offset by repayment of foreign currency notes at Hyderabad. ... Bhogapuram debt as of today, what we have drawn is only about INR 700 crores. The total debt to be availed is INR 3,250 crores, of that INR 700 crores only drawn. So another INR 2,500 crores will be added in the next 2 years.

Guidance & targets

Capex

  • Bhogapuram Airport Capex Capex · FY25 · High confidence INR 12-13 billion
    Bhogapuram Airport, now the construction is happening in full swing. And as Saurabh has explained, we have almost touched the 34% of the progress. In this current financial year, we are likely to spend about INR 12 billion to INR 13 billion on the capex.

    — GRK Babu

Debt

  • Bhogapuram Airport Debt Addition Debt · next 2 years · High confidence INR 2,500 crores
    Bhogapuram debt as of today, what we have drawn is only about INR 700 crores. The total debt to be availed is INR 3,250 crores, of that INR 700 crores only drawn. So another INR 2,500 crores will be added in the next 2 years.

    — GRK Babu

  • Net Debt Peak Debt · next 12-18 months · Medium confidence peak then fall
    So the net debt level, I think, should peak in the next 12 to 18 months, and then it should start to fall.

    — Saurabh Chawla

Regulatory

  • Delhi Tariff Order Regulatory · Q4 FY25 · High confidence order by December, effective April 1, 2024
    Regulator has already asked SBI to complete the entire work within 6 months. So we're expecting the order latest by December, otherwise, the last quarter. ... So the order will be effective from 1st April 2024, while order will come in the last quarter of our FY25. Sorry.

    — GRK Babu, Saurabh Chawla

Sustainability

  • Net Zero Target Sustainability · by 2030 · High confidence Net 0
    Both Delhi and Hyderabad Airports are targeting net 0 by 2030 and are rated at Level 4 plus transition by ACI.

    — Saurabh Chawla

Cash Flow

  • Delhi Airport Free Cash for Equity Generation Cash Flow · next 3-4 years · Medium confidence generating free cash
    Delhi, once the new tariff order comes, we'll be able to give you much better guidance. But we are targeting free cash for equity generation in next 3 to 4 years at Delhi Airport also.

    — Saurabh Chawla

Operations

  • Hyderabad Airport Non-Aero Work Completion Operations · Q3 FY25 · High confidence entire work completed
    We are expecting the entire work will be completed by only third quarter of this financial year. You will able to see a good jump in the non-aeronautical revenue only in the fourth quarter.

    — Saurabh Chawla

  • Delhi Terminal 1 Full Capacity Utilization Operations · Q3/Q4 FY25 · Medium confidence full capacity used
    However, the full capacity of Terminal 1 will be used maybe in the third or fourth quarter once we complete the canopy work.

    — GRK Babu

What to watch in Q2 FY25

Delhi Tariff Order Announcement

Q4 FY25
Current Expected by December FY25
Target Order announced and details available

Why it matters

The tariff order will be effective retrospectively from April 1, 2024, and is crucial for Delhi Airport's revenue and EBITDA growth.

Regulator has already asked SBI to complete the entire work within 6 months. So we're expecting the order latest by December, otherwise, the last quarter. ... So the order will be effective from 1st April 2024, while order will come in the last quarter of our FY25. Sorry.

Q&A highlights

6 direct
FCCB conversion to ADP shares Direct
No, I think there is some misunderstanding. The FCCBs that were issued to ADP, a little more one year back, they continue to be FCCBs. So those have not been converted by ADP. They will continue for a period of 5 years from the date of issuance, minimum period of 5 years from the date of issuance. So there's no conversion from that aspect. And hence, the equity stack will not change.

Clarifies that ADP's FCCBs have not been converted to equity, meaning the equity structure remains unchanged for now, contrary to analyst's assumption.

Asked by Mohit Kumar

Delhi Airport tariff order timeline and effectiveness Direct
Regulator has already asked SBI to complete the entire work within 6 months. So we're expecting the order latest by December, otherwise, the last quarter. ... So the order will be effective from 1st April 2024, while order will come in the last quarter of our FY25. Sorry.

Provides a clear timeline for the crucial Delhi tariff order, indicating it will be effective retrospectively from April 1, 2024, but announced in Q4 FY25, which will impact future financials.

Asked by Mohit Kumar

Weakness in Delhi Airport non-aero revenue per pax and EBITDA per pax Partial
Yes. I think when you look at the non-aero per pax revenue, what it takes into consideration is the inflationary impact as well as improved spend. So it can vary anything between 3% upwards also. When you really look at this particular quarter's number, it will have a combination of few things. Q1 is not the best quarter. Q4 is a quarter where you have the maximum revenue coming in both from the aero as well as non-aero point of view. And there could be another contributing factors like spending duty free and all that.

Addresses the analyst's concern about slower non-aero revenue per pax growth by attributing it to seasonality (Q1 being weaker) and the base airport charges, with expectations for improvement post-tariff implementation and T1 opening.

Asked by Karthik Chellappa

High OpEx at Hyderabad Airport despite strong revenue growth Direct
See, in case of the Hyderabad, since the expanded terminal is almost 3x bigger than the existing terminal. The costs are now started being incurred. And as far as the revenues are concerned, aeronautical is, of course, in line with the tariffs which are already in place. Non-aeronautical revenue all the new shops are getting opened up. We are expecting the entire work will be completed by only third quarter of this financial year. You will able to see a good jump in the non-aeronautical revenue only in the fourth quarter.

Explains that higher OpEx is due to costs incurred for the 3x larger expanded terminal, with non-aero revenue expected to see a significant jump in Q4 FY25 once all new shops are operational.

Asked by Karthik Chellappa

Operational changes and travel retail contribution post-merger with Groupe ADP Direct
So Prateek, honestly, nothing has changed. They were the 49% equity holder of GMR Airports, which was a subsidiary of the Listco. Now they are just -- they're going to be 33% odd equity holder at the Listco. They had same number of board seats as the GMR family had at the private entity level. They will have the same board seats, 5, both for GMR family nominees and ADP, they will have 5 nominees. So nothing has actually changed. It's a very smooth migration of just shareholding from a private entity level to a public entity level.

Clarifies that the merger is a structural change with no immediate operational impact or change in ADP's board representation, but enables more efficient cash flow and balance sheet management for the listed entity.

Asked by Prateek Kumar

Net debt trajectory with Bhogapuram capex Direct
Bhogapuram debt as of today, what we have drawn is only about INR 700 crores. The total debt to be availed is INR 3,250 crores, of that INR 700 crores only drawn. So another INR 2,500 crores will be added in the next 2 years. ... So the net debt level, I think, should peak in the next 12 to 18 months, and then it should start to fall.

Provides a clear outlook on the debt profile, detailing future drawdowns for Bhogapuram and projecting a peak in net debt within 12-18 months before a subsequent decline.

Asked by Prateek Kumar

International expansion strategy and asset-light opportunities Direct
Right now, our focus is on Middle East. And more so where you can look at the asset-light opportunities like you would know we have submitted our bid for Kuwait Airport Terminal 2. Likewise, we are also looking at Abha in Saudi, that's where we have submitted our request for qualification.

Outlines the company's current international focus on the Middle East and specific asset-light O&M contract bids in Kuwait and Saudi Arabia, indicating future growth avenues.

Asked by Prateek Kumar

3 min read 6 chapters

Detailed narrative

Strong Q1 FY25 Performance Driven by Traffic Growth

GMR Airports reported a robust Q1 FY25 with total income reaching INR 25.2 billion, marking a 19% year-on-year increase. This growth was primarily fueled by a 7% year-on-year rise in total passenger traffic, which hit 31.8 million. EBITDA for the quarter stood at INR 10.2 billion, an 18% year-on-year increase, with the EBITDA margin improving to 52% from 48% in Q4 FY24. Delhi Airport saw a 7.5% income growth to INR 12.9 billion, while Hyderabad Airport's income surged 21.4% to INR 5.8 billion.

Merger Completion and Strategic Outlook

The merger of GMR Airports with GMR Airports Infrastructure Limited is now complete, streamlining the corporate structure and bringing airport assets closer to GIL shareholders. Management emphasized that this move enhances corporate governance and enables more efficient movement of earnings, particularly for balance sheet management and growth. While Groupe ADP's equity holding in the listed entity is now around 33%, the operational structure and board representation remain consistent with prior arrangements, ensuring continuity.

Airport Expansion and Operational Milestones

Physical work for the expansion of both Delhi and Hyderabad Airports is 100% complete. Delhi's new Terminal 1 is set to restart operations on August 16th, with full capacity utilization expected by Q3/Q4 FY25. At Hyderabad, the expanded terminal, which is three times larger, is incurring costs, but all new non-aeronautical shops are opening, with a significant revenue jump anticipated in Q4 FY25. Bhogapuram Airport's physical progress stands at 34% as of July, with an estimated INR 12-13 billion capex planned for FY25.

Debt and Capital Allocation Strategy

Consolidated net debt, excluding FCCBs, increased by approximately INR 750 crores ($9 billion) from Q4 FY24 to INR 280 billion. This was primarily due to borrowings for Bhogapuram Airport and balance capital expenditures at Delhi, partially offset by foreign currency note repayments at Hyderabad. Management indicated that INR 700 crores of the total INR 3,250 crores debt for Bhogapuram has been drawn, with an additional INR 2,500 crores expected over the next two years. The company projects that net debt will peak in the next 12-18 months before starting to decline.

Regulatory and International Opportunities

Delhi Airport has submitted its tariff proposal for the fourth control period (April 1, 2024, to March 31, 2029), with an order expected by December 2024, which will be retrospectively effective from April 1, 2024. Internationally, GMR Airports is focusing on asset-light opportunities in the Middle East, having submitted bids for the Kuwait Airport Terminal 2 O&M contract and a request for qualification for Abha Airport in Saudi Arabia. The company aims to generate free cash for equity in Delhi Airport within the next 3-4 years.

ESG Initiatives and Industry Recognition

GMR Airports continues its commitment to ESG principles, with Delhi and Hyderabad Airports targeting net zero by 2030 and rated Level 4+ transition by ACI. All GMR Airports are ranked among the top 100 globally by Skytrax, with Delhi at 36th, Hyderabad at 61st, and Goa at 92nd. The company spent INR 25 million on CSR in Q1, benefiting over 140,000 individuals, predominantly from vulnerable groups.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Services earnings calls